Advocates: Efforts to stop AZ Medicaid fraud haven't worked and are hindering legitimate providers

Community advocates and health care providers told Arizona lawmakers on Wednesday that Medicaid fraud prevention efforts have not stopped crime and are hindering legitimate health care providers.

In 2023, state leaders announced they’d crack down on a Medicaid fraud scheme.

Arizona’s Medicaid agency, AHCCCS, has a fee-for-service program called the American Indian Health Plan. It’s been abused by bad actors who charge the state for addiction treatment services they never provide.

The fraud scheme primarily targets Native Americans. Perpetrators hold people against their will and sometimes abuse them in fake sober living homes around the state.

The scheme has resulted in an estimated $2.8 billion of fraud, only a fraction of which the state has been able to recover.

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In 2023, state leaders announced they were cracking down on the fraud scheme, and over the past two years, various policies and laws have been put in place to curb the fraud.

However, at a state Senate hearing this week, Navajo activist Reva Stewart told lawmakers perpetrators are still going after victims.

“You can see recruiters out there at the park actively recruiting. So it’s still happening today. I’m still having people who have died as we were doing outreach,” Stewart said.

Stewart also said many Native Americans are left homeless and struggling when the state shuts down the sober living homes they've been staying in. Her organization, Turtle Island Women Warriors, is trying to get people the resources they need to survive.

Policies affecting legitimate health care providers

Attorney Heather Dukes represents several Arizona health care providers. She said they’re now struggling to get reimbursements for treating Native American patients because of the measures the state has implemented to try and curb fraud.

“Timely payment is rare," Dukes said. "Many providers simply turn away American Indian Health Program members stating there are no available beds. We do not. We continue to accept these patients knowing full well it will likely result in uncompensated care.”

Consequences for AHCCCS?

The state is currently fighting an enormous class action lawsuit by Medicaid fraud victims who estimate 2,000 people have died in the scam.

The former AHCCCS medical director, Dr. Satya Sarma, is cited heavily in that lawsuit. She has confirmed repeatedly that AHCCCS knew about the Medicaid fraud scheme for years, but said she was admonished for bringing it to the attention of her supervisors in 2021.

Sarma repeated her story to lawmakers on Wednesday.

“The question is could this have been prevented? Yes,” she said. “I know because I was there.”

Sarma said she was written up for “insubordination and disrespect,” and because AHCCCS wouldn’t take action — people died.

“I still lie awake wondering how many people were harmed or died since 2021,” Sarma said.

AHCCCS Inspector General Vanessa Templeman told the Senate committee on Wednesday that she couldn’t answer questions about why members of the agency haven’t been held accountable, in part because of ongoing lawsuits.

Lawmakers also heard from Lynne Emmons, AHCCCS assistant deputy director for the Division of Fee for Service Management. Emmons spoke to the agency’s “prior authorization” process, which is how her branch determines whether they’ll cover medical services that require prior approval.

Emmons indicated the system is working, but committee chair Sen. Carine Werner (R-Scottsdale) did not agree.

“I believe there’s a huge lack of integrity going on in this testimony,” Werner told Emmons. “There are members, AHCCCS members, that are dying that are not being treated and there are providers that are going out of business and I’m really questioning, how are you sleeping at night knowing this?” she asked.